Google's Intel Shift and Stricter Export Rules Add Pressure to TSMC's Capacity Crunch

Taiwan Semiconductor Manufacturing Co. finds itself squeezed from two directions at once. The chipmaker’s inability to keep pace with surging artificial-intelligence demand is prompting marquee clients to diversify their supply chains, even as governments on both sides of the Taiwan Strait move to close loopholes that allow advanced chips to reach China. The combined pressure tests a stock that has more than doubled over the past year.

Google has become the most prominent defector so far. According to industry reports, the search giant has placed orders for more than three million custom AI processors with Intel Foundry, with delivery scheduled through 2028. Nvidia is also evaluating Intel’s new 18A process for future chip designs. The moves reflect a growing unease among tech leaders about relying too heavily on a single manufacturer. TSMC chief executive C.C. Wei has repeatedly warned that the chip shortage will persist for years, and while the company is ramping capacity — it produced 4.3 million wafers in the first quarter of 2026, up from 3.3 million a year earlier — demand continues to outstrip supply.

Political headwinds are also gathering force. Taiwan’s government is drafting significantly tighter export controls on AI chips, making illegal shipments to China a criminal offense for the first time. The new rules, which would apply to all Chinese customers and ban any chip exceeding a specified computing threshold, align Taipei with Washington’s hardline stance. Meanwhile, on Tuesday U.S. senators Jim Banks and Andy Kim called for even stricter oversight of contract manufacturers, demanding that the Bureau of Industry and Security shut down a loophole that allows Chinese firms to buy advanced chips through foreign subsidiaries. TSMC will likely have to vet international customers more thoroughly, potentially crimping order volumes from certain regions.

Should investors sell immediately? Or is it worth buying TSMC?

At the stock exchange, investors have taken the twin challenges in stride. TSMC’s shares closed Monday at €370.00 and edged down to €365.50 later in the week, a modest retreat of roughly 4% from a week earlier. Year to date, the stock has still gained more than 100% — a reflection of the company’s underlying financial strength. Revenue jumped to $35.9 billion in the first quarter of 2026, far exceeding expectations, and management forecast second-quarter sales as high as $40.2 billion.

Operationally, TSMC continues to press ahead. Mass production of the new two-nanometer chips began in late 2025, with each wafer costing around $30,000 — a testament to the company’s pricing power. In the third quarter of 2025, a new design center is set to open in Munich, focusing on automotive applications and the Internet of Things. The company’s Arizona fabs are already fully booked through the end of 2027. High-NA EUV lithography tools, which could unlock further gains, remain in the development stage.

High-level officials in Taipei are still reviewing the final details of the export-control legislation, and once passed, the rules could reshape the Asian technology market. Chinese customers will likely face severe supply constraints. Yet TSMC’s growth trajectory appears resilient: the global hunger for advanced AI semiconductors continues to far exceed available production capacity, and the company’s order books remain stuffed. The question is whether the combination of client shifts and regulatory tightening will eventually dent a momentum that has already survived years of geopolitical turbulence.

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